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allowing all the banks to report that they’re not only solvent, but fully capitalized. Both statements can’t be true. It can’t be that they need $2 trillion, because they have massive losses, and that they’re fine. These are all people who have failed. Paulson failed, Geithner failed. They were all promoted because they failed….”
    Geithner denied any failure, claiming he was never supposed to regulate the banking business. During congressional testimony in March 2009, Geithner, who was the president of the New York Fed during much of the credit boom, indicated he had little interest in scrutinizing other banks’ activities. “I’ve never been a regulator, for better or for worse,” stated Geithner with surprising candor, adding, “And I think you’re right to say that we have to be very skeptical that regulation can solve all of these problems. We have parts of our system that are overwhelmed by regulation.”
    “Overwhelmed by regulation!” lamented journalist Bill Moyers over Geithner’s comments. “It wasn’t the absence of regulation that was the problem, it was despite the presence of regulation you’ve got huge risks that build up.” Black agreed, saying, “Well, he may be right that he never regulated, but his job was to regulate. That was his mission statement. As president of the Federal Reserve Bank of New York, [he was] responsible for regulating most of the largest bank holding companies in America. And he’s completely wrong that we had too much regulation in some of these areas. I mean, he gives no details, obviously. But that’s just plain wrong.”
     
     
    As 2009 drew onward, more financial institutions fell by the wayside, even as the media pumped out heartening stories of an economic rebound and more stimulus activity. In the face of criminal charges, the Alabama bank Colonial BancGroup, Inc., was closed by regulators in August 2009, becoming the seventy-seventh failed bank since the start of the year. It was also the largest bank failure since the loss of Washington Mutual, Inc., in 2008. Colonial posted a $606 million second-quarter loss in 2009, primarily due to loans to developers and home builders in Florida, a state where the housing industry tanked quickly. The bank failed to meet capital requirements to qualify for TARP funds because it simply did not have enough financial reserves to be eligible for TARP support.
    One problem, said Robert Auerbach, formerly an economist with the Financial Services Committee of the U.S. House of Representatives, is that central bank officials are often too close to the banks they are meant to keep in check. “The boards of directors of every Fed bank, including the New York Fed, have nine directors. Six of them are elected by the banks in the district,” said Auerbach. “So you have the banks in New York electing the directors that are supposed to supervise them.”
    One proven means for keeping the true condition of some banks from the public eye during any reorganization is to retain the officers responsible for the problem in the first place. “[A]s long as I keep the old CEO who caused the problems, is he going to go vigorously around finding the problems? Finding the frauds?” asked Black in Moyers’s interview. He added, “We adopted a law after the Savings and Loan crisis, called the Prompt Corrective Action Law. And it requires [bank officers] to close these institutions. And they’re refusing to obey the law.”
    When asked if Geithner and others in the Obama administration have engaged in a cover-up along with the banks, Black responded, “Absolutely, because they are scared to death…of a collapse. They’re afraid that if they admit the truth, that many of the large banks are insolvent. They think Americans are a bunch of cowards, and that we’ll run screaming to the exits. And we won’t rely on deposit insurance.”
    DOWNSIZING AMERICA
     
    P EOPLE LIKE B LACK AND Moyers who are in prestigious positions fail to